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COPYRIGHT 2002 Berkeley Electronic Press
Abstract
The article discusses the relationship between consumer protection and contract law in the European Community context, and its bearing on the national legal systems of the Member States. It takes as a starting point the Green Paper on EU Consumer Protection of October 2001, an official (even if not legally binding) document of the European Commission, where it is stated that differences in national laws may create obstacles to the smooth working of the internal market, particularly in cross-trade between consumers and businesses, and therefore legal intervention at the EC level might be necessary in the form of either a framework directive on commercial practices coupled with specific directives (so-called mixed approach), or of a series of specific directives tackling individual problems. The Green Paper is then discussed in the light of several other official documents of the EC institutions and of some important inititives related to consumer protection and contract law (such as the Principles of European Contract Law, a kind of "Restatement" of European contract law), in order to assess the current state of the issue and possible future trends of development. The possibility of Community regulation in this field poses several problematic elements. The principle of enumerated competences and that of subsidiarity, which limit Community action, force it to frame the planned regulatory intervention in terms of obstacles to the working of the internal market created by different legal environments in the national legal systems; at the same time, most documents indirectly recognize that legal diversity is not in itself a sufficient reason for regulatory intervention, but only if this situation in fact hinders cross-border trade, an issue where there is strong disagreement. Even more problematic is the possibility of codifying at the Community level the whole of contract law, or, as it has been also proposed, the whole of private patrimonial law: not only is the issue of the existence of a sufficient legal basis for regulatory action very dubious, but what seems crucial, and yet almost completely neglected in the documents analysed, is the way that general contract law (or private patrimonial law) should be linked to the existing acquis communautaire in the field of consumer protection. Two possible strategies can be envisaged: either the protective rules of consumer law are kept as a separate body of law conceived as a limited exception to the general principles of freedom of contract, or the entire structure of contract law must be reviewed in order to take into consideration the existence of contracts with asymmetric powers of the parties, of which consumer contracts are one important (but not the only) example. Both alternatives have advantages and drawbacks, but at the moment it is almost impossible to forsee which of them, if any, will be experimented at the Community level, since the debate on it is still lacking at the official level. Yet, it seems that this is a crucial choice if EC law is to succeed in complementing national laws in this area. Finally, another controversial issue is how this body of Community law should relate to national laws: it could continue with the well-known minimum harmonisation technique, which allows states to retain more protective legislation, or, as it has been suggested, it could shift to a maximum harmonisation standard, which would severely impair flexibility for member States to adapt EC rules to national particular social and economic goals and needs.
1. INTRODUCTION
The aim of this paper is, taking as a starting point the Green Paper on EU Consumer Protection, to set it in the wider context of the efforts currently going on at the European level in order to achieve greater uniformity in contract law. In fact, The Green Paper, issued by the Commission in October 2001 (1), must be analysed in a wider framework of documents and initiatives, both official and unofficial, in order to assess its relevance and possible future impact.
The purpose of this document, as in generally the case for Green Papers, is to launch an extensive public consultation on several issues related to consumer protection, the most important being whether differences in national regulations on fair commercial practices are such as to constitute significant barriers to the working of the internal market; secondly, should such barriers be proven, which is the most desirable strategy to achieve greater harmonisation at the Community level between the so-called specific approach, based on a number of legal instruments tackling specific problems, and the so-called mixed approach, i.e. a framework directive containing a general clause concerning the fairness/unfairness of commercial practices, coupled with several other specific legal instruments.
2. THE GREEN PAPER ON CONSUMER PROTECTION, THE INTERNAL MARKET AND COMPETITEVENESS
The Green Paper takes as a starting point the idea that the cross-border movement of goods and services is a necessary premise for consumer protection, since the competitive pressure at the Community level produces a more efficient and competitively priced supply of goods and services. The document terms this a "virtuous circle" (2) that needs to be established through a suitable regulatory framework that stimulates cross-border trade both on the consumers and businesses side.
Although the existence of a link between a working market of goods and services and the possibility of consumers to take advantage of it cannot be seriously challenged, the choice of the Commission to base its analysis and proposals on the competitiveness of the internal market is highly significant, because it moves the issue of consumer protection from the forefront of the scene to a kind of beneficial side-effect (3). In other terms, it seems that competitiveness is the predominant and ultimate goal of intervention, whose establishment is capable also of producing positive results for consumers, mainly in terms of access to greater choice and better prices. This is in fact no novelty in itself: EC intervention in the field of consumer law is historically a result of the evolution of the policies concerning the internal market, and the close link existing between the working of the internal market and consumer protection is constantly repeated in every legal measure affecting consumers (4). Still, this element must not be forgotten, because of its potential impact on future developments in EC consumer protection law. As it has been pointed out, the strategy of the Green Paper is to link the market to the "confident consumer", who can act as a catalyst for competitiveness; yet, "there must remain a doubt whether the measures required by the confident consumer are equal to the measures required by the protected consumer" (5). The rationale of EC consumer protection will be analysed later in this paper, but the existence of potential tensions and ambiguity must be borne in mind from the outset.
According to some, the main reason for the Commission's emphasis on competitiveness is not the need to find a suitable legal basis for action (which is certainly a relevant element), but rather the belief that this seems to be the best strategy in order to convince European citizens that they too, and not only businesses and professionals, have something to benefit from the strengthening of the internal market, by enhancing their living standards. Still, although there is clearly a need to convince consumers, and more generally citizens, that the European Community is taking care of their interests (6), it is far from clear that this can be achieved merely by enhancing the economic performance of the market: "Unless the Commission is prepared to act as the champion of the consumer, it seems likely that some national legislators will insist upon keeping the higher standards of domestic law, so that EC regulation will have to remain a minimum standards form of harmonisation, with the consequence that regulatory diversity is preserved and this possible obstruction to cross-border trade left partially in place" (7).
Moreover, the Commission in rather transparent in underlying that EC action is not targeted exclusively to the consumers, since businesses as well can profit from it, particularly small and medium enterprises: "The internal market's main asset is that it has the largest pool of consumer demand in the world--and this asset is not being fully exploited. Enabling businesses, especially SMEs, to access this potential, as easily as domestic markets, would be a powerful stimulus to competitiveness" (8).
3. DIFFERENCES IN NATIONAL LAWS AS AN OBSTACLE TO THE INTERNAL MARKET
The other basic tenet upon which the analysis of the Green Paper is based is that differences in national laws can hinder the cross-border trade between consumers and businesses and thereby the correct working of the internal market, and consequently need somehow to be removed: "Where cross-border restrictions to business-to-consumer trade exist, a greater degree of harmonisation of the rules that regulate business-consumer commercial practices is essential to the development of a fully functioning internal market" (9). In fact, this issue has a rather ambiguous status, since it is simultaneously considered as a working hypothesis, and therefore considered as existing, and as a probable (but not certain) situation to be established through analysis and external information: the Commission takes for granted that a fragmented set of regulation and a fragmented system of enforcement hampers the working of the internal market, but at the same time the first question on which it invites comments from all stakeholders concerns what are the main barriers resulting from differences in national regulations.
There are significant differences among national laws in the field of fair commercial practices has been established, as it has been demonstrated also by three extensive expert studies undertaken on request of the Commission (10): most member States have a general principle regulating business-consumer commercial practices, although its content can vary significantly (bonos mores, fair commercial practices, good marketing practices, etc.). These general principles are further specified by legislation or pertinent case law. Although some common trend can be detected, the scope and application of every national legislation varies widely in practice and, according to the Commission, this divergence "can act as a barrier to trade and distort competition" (11).
The Green Paper also underlines the fact that further divergence stems from EC law itself, since EC consumer protection law does not constitute a comprehensive regulatory framework, and moreover it generally allows member States to keep stricter or more detailed measures. Paradoxically, therefore, existing EC law, although it harmonises some selected issues, at the same time produces a higher level of discrepancies between national laws (12).
Moreover, EC consumer law suffers from several drawbacks, because often directives are very detailed, and after some time prove to be inflexible and obsolete, particularly in relation to an area such as marketing practices, which are constantly and rapidly evolving; at the same time, changing them is cumbersome and time-consuming, and therefore traditional EU law-making instruments may be inefficient if not flanked by other regulatory strategies.
4. THE SPECIFIC AND THE MIXED APPROACH
As a consequence of the existence of significant barriers to the working of the internal market deriving from legal divergence, the Commission proposes two alternative strategies: the first is to continue along the existing pattern, enacting a series of directives tackling specific problems (the so-called specific approach); the second, termed "mixed approach", consists of a system based on a comprehensive framework directive on commercial practices establishing a general clause (centred either on fair commercial practices or on misleading practices) (13), supplemented and completed by specific directives where needed. According to the Green Paper, the first strategy has the advantage of having a narrower focus, and therefore it should be easier to reach agreement among the Member States. Yet, it is clearly not the way preferred by the Commission: "there are clearly some doubts as to the effectiveness of relying exclusively on this approach in delivering a genuine internal market" (14).
The mixed approach would, on the other hand, have a main advantage because "its comprehensive nature reduces the need for further detailed consumer protection regulation" (15), achieving greater flexibility. Besides, the existence of a general legal framework would reduce (although not eliminate completely) the need for specific regulation concerning individual issues.
General clauses are a mechanism that is well known in all national systems, even though their use and scope varies significantly. They are particularly useful because their generality allows flexibility, i.e. adaptation in their application according to the changing circumstances of the legal environment to be regulated. At the same time, this characteristic constitutes an important limit: being general, their content cannot be established ex ante, therefore they leave great discretion to the interpreter, thereby creating a risk of divergent and hydiosincratic application, impairing legal certainty (16). The Commission is aware of this risk, but seems to be convinced that it can be avoided: "To provide the required certainty and prevent differing legal interpretations by national courts, the framework directive would have to be more than simply a general principle regulating business-consumer commercial practices. It would address the main differences in national rules on commercial practices which affected the operation of the internal market, through establishing clear EU-wide rules through harmonisation" (17). Still, this is exactly the problem: if ex hypothesis there are significant divergences among national laws, the question is to devise a general principle sufficiently specific to avoid divergent application, and at the same time sufficiently general not to generate the same problems produced by specific directives. In other terms, what is required is a sort of squaring of the circle, no easy task even for EC institutions.
According to the Commission, this result could be achieved by devising a combined strategy, which complements the general standard of the framework directive with other mechanisms: the first is the already known method of specific directives; along with it, greater use should be made of EU-wide self-regulation (involving greater stakeholder participation) (18) and non-binding practical guidance, either through Commission Recommendations or an indicative list of general and sector-specific examples of commercial practices, which could be updated by a regulatory committee at the Community level ensuring transparency and consultation (19).
A further problem that concerns the issue of consumer protection is the standard that should be employed as the core concept of the general clause. Theoretically, two alternatives are possible: the standard of "fair commercial practices" (or "good market behaviour") and that of "misleading (or deceptive) practices", the second having a narrower focus. The Commission clearly favours the more general concept of fair commercial practices, although it recognise that it might be easier to reach agreement on the concept of misleading practices, which is a kind of "common core of unfair trading concepts across the EU" (20). Significantly, the Commission underlines that in both approaches a central element would be the existence of general obligations on information disclosure, implying a duty to "disclose all material information to consumers in a timely and clear manner" (21). In order to avoid national discrepancies, the general clause would have to be complemented with general tests of fairness and specific rules on commercial practices, such as information disclosure, misleading and deceptive practices, marketing and commercial practices in the contractual and after-sale phases.
The last crucial issue of the Green Paper concerns enforcement mechanisms: the Commission recognises that "any regulatory measures must be linked to adequate enforcement structures that ensure their consistent application", otherwise they run the risk of remaining dead letter. Still, enforcement is currently mainly left at the State level, although some co-operation and co-ordination has developed (22). This situation seems unsatisfactory, particularly in the perspective of the enactment of a wider EC regulatory framework. First of all, systematic information exchange through mutual assistance of national enforcement bodies is crucial, because "extensive information exchange is the keystone of effective market surveillance" (23). This requires a EU framework for co-operation between national authorities, where the EC Commission would act as a monitor through the use of systematic feedback information (24). According to the Green Paper, this strategy should be based both on regulatory and non-regulatory measures (such as exchange of best practices, information and education initiatives) (25), and should be based not only on ex post control (such as the one performed by courts), but on preventive control as well.
5. THE FOLLOW-UP COMMUNICATION TO THE GREEN PAPER
The Green Paper has launched an extensive debate among stakeholders, and in June 2002 the Commission has published a Follow-up communication (26), in which it recognises that not all the proposals of the Green Paper are supported by all respondents, but nevertheless underlines the fact that broad support exists on a number of crucial issues, among which the proposal for a framework directive, and therefore further action is required (27).
Of those who support reform through a framework directive (28), most agree that the most suitable standard would be that of fair commercial practices. The main elements of such a directive (on which the Commission intends to have further consultation) should be: maximum harmonisation with a high level consumer protection; simplification and deregulation of existing provisions; application of the principle of mutual recognition and control by the country of origin; balance between legal certainty and adaptability to market circumstances; a general clause based on the standard of fair commercial practices comprising two core elements (unfairness of the practice and consumer detriment test) and supplemented by specific rules (29); focus on unfair practices that cause detriment to the interests of consumers as a whole (30).
These elements should be debated within an expert group established and chaired by the Commission, comprising experts nominated by national governments that should exchange views and identify, through the comparison of common and divergent concepts and rules, the level and content of any harmonising measure (31). Moreover, the Commission is also planning to set up an academic group that should work on a comprehensive comparative law study dealing with the notion of fairness, in order to distinguish common features and elements that are specific to one or more national legal systems.
The Commission repeatedly underlines the fact that any regulatory measure concerning fair commercial practices would not deal with contract law and contractual remedies (32), since these issues should be dealt with in the Follow-up to the Communication on European contract law, which is due before the end of 2002. Even though the choice to keep contractual aspects together with the general issues of contract law seems reasonable, it would have been useful if the Commission would have provided some clues on how it intends to relate consumer contract problems to general contract law, since this seems to be a very controversial and yet crucial issues, particularly because a significant portion of existing EC contract law relates to consumer protection (33).
The Follow-up Communication sticks to the idea that codes of conduct voluntary entered by business could be a very helpful complement to the framework directive, and that in order to protect legitimate expectations of consumers non compliance with the rules of the code would be considered unfair under the framework directive (34).
A further issue where the Commission deems that further elaboration is required is stakeholder participation, an element which is of great importance to ensure proper commercial practices, but for which adequate mechanisms are lacking. According to it, the framework directive should set general criteria for the selection of the relevant stakeholders, in order to ensure fair representation. Finally, further consultation is required also for defining the best mechanisms for producing non-binding guidance: this is surely needed in order to supply a point of reference for businesses, consumers and judicial and enforcement authorities, and ensure legal certainty and coherent application of the general standard, but there is not sufficient agreement on whether this can be better achieved through Recommendations issued by the Commission or through guidelines established by a regulatory committee (35).
The Follow-up Communication stresses that the largest support from all stakeholders involved was given to the proposal concerning the creation of mechanisms for enforcement co-operation (judicial, administrative and informal), to the extent that the Commission intends to adopt a proposal by the end of 2002 (36).
An issue, which is only briefly sketched, but is nevertheless extremely important, concerns the role of mutual recognition and the principle of country of origin. According to the Commission "The combination of an adequate level of harmonisation and the principles of mutual recognition and country of origin (which should be enshrined in the framework directive) will have as a consequence that divergent interpretations in jurisprudence at national level will not result in the fragmentation of the internal market" (37). This is related to the question of selecting the proper level of harmonisation between minimum and maximum, a problem that has been often debated (38). Recent documents of the Commission seem to point to a strategic shift from minimum harmonisation, which is a widespread feature of existing EC consumer law, to maximum harmonisation, which seems to be a preferable alternative because it avoids problems of divergence in national transposing rules (39). Yet, as we will see, the shift from minimum to maximum harmonisation is not merely a technical choice, but on the contrary has crucial policy implications, which can be rather controversial. The Commission itself seems to acknowledge this problem when it affirms "it is not politically realistic to expect Member States to abandon the minimum clauses in existing consumer protection directives without addressing these underlying differences [i.e. differences of approach to consumer protection in Member States]" (40).
6. THE CONSUMER POLICY STRATEGY 2002-2006
The Commission has issued another important document in the field of consumer protection in May 2002, containing the Consumer Policy Strategy for the years 2002-2006 (41). The Commission, noting that "EU Consumer Policy is at a critical juncture", and that "consumers should reap tangible benefits from the single market" (42), sets three mid-term objectives: a high common level of consumer protection, which requires "the establishment of common consumer protection rules and practices across Europe" (p. 11); effective enforcement of consumer rights, guaranteed through better co-ordination of public national authorities (43); greater involvement of consumer organisations in EU policies through consultation requirements, participation in consultation bodies and working groups and information and education initiatives. Once again, the aim of consumer protection in the EC is linked to the internal market: "The development of consumer policy at EU level has been the essential corollary of the progressive establishment of the internal market" (44) and "Barriers to cross-border trade should therefore be overcome in order that the consumer dimension of the internal market can develop in parallel with its business dimension" (45). Again, a source of obstacles to cross-border trade is found in the different consumer protection rules that apply in the member States, which hampers both consumers and businesses, creating uncertainty and increasing costs (46). For consumers what is required is harmonisation (beside safety issues) of "those aspects of consumer economic interests that give consumers the confidence necessary to conduct transactions anywhere in the internal market" (47). According to the Commission, "It could mean setting in place a common set of simple and clear EU rules and safety requirements, on commercial practices and on consumer contractual rights. It could also mean filling gaps between existing EU rules, which will require reform of existing directives" (48). To this end the document recalls the Green Paper on Consumer Protection, and its strategy to reform existing EU consumer protection directives adapting them from minimum to full harmonisation, since a sufficient degree of harmonisation would be needed before the principle of mutual recognition could be applied for the remaining questions (49).
7. THE COMMUNICATION ON EUROPEAN CONTRACT LAW
The documents related to consumer protection must be evaluated in the light of another...
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